Focus on Economic Data: U.S. Employment and the Unemployment Rate, April 2013

This lesson examines the U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of April, 2013, reported May 3, 2013. This lesson introduces the basic concepts of the BLS employment and unemployment data. The meaning and importance of the data are discussed. Assessment exercises are included for reinforcing knowledge of the concepts.

Current Key Economic Indicators

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.4% in December on a seasonally adjusted basis. The gasoline index fell 9.4% and was the main cause of the decrease in the seasonally adjusted all items index. The all items index increased 0.8% over the last 12 months, although the core inflation rate (less food and energy) did not change in December.

The unemployment rate rose to 5.7% in January of 2015, according to the Bureau of Labor Statistics release of Feb. 6, 2015. Total nonfarm employment rose by 257,000. Job gains were particularly strong in retail trade, construction, health care, financial activities, and manufacturing.This is the second month in a row that posted gains in construction and manufacturing.

Real GDP increased 2.6% in the fourth quarter of 2014, according to the advance estimate released by the Bureau of Economic Analysis. Consumer spending drove growth due to the reduction in gas prices, while a decrease in government expenditures was the most significant drag on growth. Third quarter growth was 5%.

In its January 28, 2015, statement, the FOMC cited the continued growth of the labor market, increased household and business spending, and below-target inflation as indicators of an economy that continues to recover. They expect below-target inflation to rise as oil prices and other "transitory" effects diminish. The statement reaffirmed the FOMC intention to keep the federal funds rate at its current low level. Notably, the FOMC added international variables to its list of factors to monitor for the timing of a rate increase.

INTRODUCTION

Each month, the Bureau of Labor Statistics (BLS) releases data from the monthly "Household Survey" conducted by the Bureau of the Census, providing a comprehensive body of information on the employment and unemployment experience of the U.S. population, classified by age, sex, race, and a variety of other characteristics.

The BLS also conducts the Current Employment Statistics (CES) program, surveying about 150,000 businesses and government agencies, representing approximately 390,000 individual work sites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls.

The BLS compiles information from these sources and announces the monthly "Employment Situation," reporting the current U.S. employment and unemployment data estimates. The monthly announcement reports employment data from the previous full month.

This lesson is about the BLS announcement, "Employment Situation: April 2013," reported May 3, 2013 This lesson will also look at the recent history of employment and unemployment data.

During the second half of the 2012-2013 school year, (January-May), EconEdLink will publish five Focus on Economic Data lessons on employment and the unemployment rate. During this time period, the lessons will begin with the 'basics' in January and progressively focus more on complex data, issues and comparisons. All monthly Focuses on Economic Data will include the current data and significant recent changes.

December 2012, reported in January 2013: employment and unemployment data basics. What is employment? What is the unemployment rate? How are they measured? What is the current data? What do they mean?

January 2013, reported in February 2013: details and issues about the measurement and meaning of employment and unemployment, adding concepts such as underemployment, full employment, etc.

February 2013, reported in March 2013: detailed breakdown of the data by region and industry (trends, identifying trends and comparisons of regions and demographic groups

March 2013, reported in April 2013: the relationships of employment and unemployment data to other economic data, such as GDP, CPI, etc., and the business cycle.

April 2013, reported in May 3013: End of the school year review of employment data and summary of the recent history of U.S. labor markets. THIS LESSON]

RESOURCES

Federal Reserve Resources for Educators: Here you can find links to instructional materials and tools that can increase your understanding of the Federal Reserve, economics and financial education.www.federalreserveeducation.org

National Economic Indicators: This Federal Reserve Bank of New York webpage explains some of the economic indicators that are used to formulate the nation's monetary policy.www.newyorkfed.org/research/

Key Economic Indicators

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers decreased 0.2 percent in March after increasing 0.7 percent in February. The index for all items less food and energy rose 0.1 percent in March after rising 0.2 percent in February.

Total nonfarm payroll employment rose by 165,000 in April, and the unemployment rate was little changed at 7.5 percent. Employment increased in professional and business services, food services and drinking places, retail trade, and health care.

Real gross domestic product increased at an annual rate of 2.5 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.4 percent.

Information received since the Federal Open Market Committee met in March suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown some improvement in recent months, on balance, but the unemployment rate remains elevated. The FOMC decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent...

PROCESS

Employment and Unemployment in April, 2013

To better understand the health of the U.S. labor markets and the impact of persistently high unemployment on the U.S. economy, take a quick look at the basic U.S. labor market data for April, 2013. See Figure 1, "U.S. Labor Market Data, April 2013," below.

Look at the unemployment data in Figure 1, above. The U.S. unemployment rate decreased again in April by 0.1 percent, falling 0.6 percentage point since April, 2013. The number of unemployed has dropped by 859,000 in the past year. Are we on the road to a "jobs recovery" since the recession?

In November, 2007, total employment in the U.S. (Current Population Survey) was 146,595,000 jobs. By December, 2009, that number dropped to 138,025. That was a loss of 8,570,000 jobs in the recession. The BLS reported a total of 143,579,000 U.S. jobs in April, 2013. That means the U.S. is still 3 million jobs behind the high of November, 2007.

Note: The BLS also revised the jobs data for the past two months, announcing that the U.S. economy generated 332,000 jobs in February (reported only 268,000 in April) and 138,000 in March, 50,000 more than the reported 88,000 increase.

[Teacher Note: Ask your students: Given this information about employment and unemployment in April, 2013, does it look like the U.S. is still in a recession?]

Take a look at more of the April, 2013, employment and unemployment report and decide for yourself.

The Employment Report – April 2013U.S. Bureau of Labor StatisticsReleased: May 1, 2013

"Total nonfarm payroll employment rose by 165,000 in April, and the unemployment rate was little changed at 7.5 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, food services and drinking places, retail trade, and health care."

Many economists agree that it takes over 200,000 new jobs each month just to keep pace with the normal growth of the population and labor force. If this generalization is true, the economy experienced a net gain in April, 2013. Why, then, did the unemployment rate decrease by just 0.1 percent? Look again at the data in Figure 1. What happened to the population, the size of the labor force, and the number of unemployed?

Remember, the unemployment rate is the number of unemployed as a percentage of the total civilian labor force. In April, 2013, with 165,000 new jobs, the number of unemployed decreased by just 83,000.. The size of the labor force decreased by 31,000. The result - a slight drop in the unemployment rate, rounded to 0.1.

In April, the U.S. labor force participation rate was 63.3 percent, a drop from 63.6 percent a year ago and participation rates over 70 percent in the late 1990s. For a history of the labor force participation rate, go to: data.bls.gov/pdq/SurveyOutputServlet

[Teacher Note: Ask your students what they think about these employment and unemployment numbers. Are they "good news" - lower unemployment rate, or "bad news" - a smaller percentage of the labor force is working? They can discuss how the numbers might mean different things in different contexts or when compared to other numbers.]

When the labor force decreases, the unemployment rate can also decreases as people become more pessimistic about finding jobs and become "discouraged workers" leaving the labor force. When these people start looking for employment, they will, again, be counted as "unemployed."

Figure 3, below, shows the monthly U.S. unemployment rates from 1990 through April, 2013. Note recent high monthly unemployment rate of 10.1 percent in October, 2009 and the most recent low unemployment rate of 4.4 percent in May, 2007.

[Teacher Note: Ask your students: Do you see the "business cycles" of the economy illustrated by the unemployment rates over time?]

For more complete labor market data, as of April, 2012, go the these Tables from the May 4, 2012, BLS employment and unemployment news release.

[Teacher Note: Students should be able to identify the recent business cycle as they look at the recent history of unemployment rate data.]

[Teacher Note: The previous twelve months have seen some improvement in U.S. economic conditions. Ask your students to identify the labor market data that has improved and the data that has not. Refer to Table A of the April 2013 "Employment Situation" report.

The national unemployment rate has dropped from 8.1 percent to 7.5 percent from April, 2012, to April, 2013.

The number of employed persons has increased by 1,645,000 in the past year.

The number of unemployed persons has decreased by 859,000 in the past year.

The labor force participation rate has decreases by 0.3 percentage points in the past year.

The number of person "not in the labor force" has increased by 1.6 million in the past year.]

Remember, this is the “non-institutionalized civilian population." Those in institutions (prison, mental facilities, etc.) and the military are not included. This means that about 63.3 percent of the total population was counted as in the “labor force” in April. 89,936,00 people in the U.S., were not in the labor force for a variety of reasons.

The first data point in determining the unemployment rate is the size of the labor force. The unemployment rate is the percentage of the labor force that is unemployed. In April, 2013,11,659,000 people were unemployed, a decrease of 83,000 from the previous month.

11,659,000 divided by 155,238 (labor force) equals 7.51 percent – when rounded to nearest tenth of a point - the reported unemployment rate of 7.5 percent.

[Teacher Note: Students should be able to calculate the unemployment rate, given figures for the size of the labor force and the number of unemployed. Give individuals or groups of students different sets of data and ask them to "do the math." ]

Key Labor Market Definitions

As a reminder, the following are the definitions of the key categories used to report employment and unemployment data from the BLS “Employment Report.” These definitions are from the BLS “Glossary.”

Civilian non-institutionalized population: Included are persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

Civilian labor force: The labor force includes all persons classified as employed or unemployed (16 and over, non-institutionalized).

Labor force participation rate: The labor force as a percent of the civilian non-institutional population.

Employed Persons: Persons 16 years and over in the civilian non-institutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family (plus those temporarily absent from employment.)

Employment-population ratio: The proportion of the civilian non-institutional population aged 16 years and over that is employed.

Unemployed: Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4 week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.

Unemployment rate: The unemployment rate represents the number unemployed as a percent of the labor force.

Not in labor force: Includes persons aged 16 years and older in the civilian non-institutional population who are neither employed nor unemployed in accordance with the definitions contained in this glossary. Information is collected on their desire for and availability for work, job search activity in the prior year, and reasons for not currently searching.

Persons who currently want a job: Persons who want a job, have searched for work during the prior 12 months, and were available to take a job during the reference week, but had not looked for work in the past 4 weeks.

Look at the section of the table on the unemployment rates for "Adult men, Adult women, Teenagers, White, Black/African American, Asian, and Hispanic/Latino Ethnicity."

[Teacher Note: Ask your students: Do you notice any patterns in this data?]

Unemployment continues to be unevenly distributed among racial/ethnic groups and age levels. Young workers are more than twice as likely to be unemployed than workers over 24 years of age. The unemployment rate for teenagers is very high. Black/African American unemployment significantly exceeds other racial/ethnic demographic groups.

Educational Attainment

Look again at Table A, specifically at the section about educational attainment (Less than a high school diploma, High school diploma, Some college/associate degree, Bachelor's degree).

[Teacher Note: Ask your students: Do you notice any patterns in this data?]

Education is a strong indicator of potential for unemployment. There is a clear relationship between educational attainment and unemployment rates. The more education you have, the less chance of unemployment - on average. What is a high school diploma worth? You will make more income, for sure (on average), but also a greatly decreased risk of unemployment.

[Teacher Note: More data on income and educational attainment is available at this BLS web page: Education Pays
. This webpage shows the relationships of educational attainment, 2011 unemployment rates, and 2011 median incomes.]

Employment - Establishment Survey Data

"Total nonfarm payroll employment increased by 165,000 in April, with job gains in professional and business services, food services and drinking places, retail trade, and health care. Over the prior 12 months, employment growth averaged 169,000 per month."

ASSESSMENT ACTIVITY

CONCLUSION

In April, 2013, the U.S. unemployment rate decreased to 7.5 percent. Job growth of 165,000 was slightly less than the average monthly growth for the past year. Slightly fewer people had given-up looking for work and/or were otherwise not counted as employed or unemployed. in April The size of the labor force increased by 210,000 The recent history of changes in the labor force, employment and unemployment is somewhat erratic - possibly reflecting much uncertainty in the economy.

U.S. economic growth, as measured by real GDP growth, increased moderately in the first quarter of 2013, after very slow growth in the fourth quarter of 2012. Recent economic growth has not resulted in the number of jobs needed for a classic economic recovery. Many economists anticipate that, even though jobs growth may continue, the unemployment rate may remain stubbornly high for some time.

[Teacher Note: Ask your students to think about the future. How long will it take the U.S. economy - especially in terms of jobs - to fully recover from the recent recession?]

Read the report. Students should summarize the arguements for including discouraged and marginally attached workers in the labor force and the officially reported unemployment rate. Should the discouraged or marginally attached workers be counted as unemployed? What does the increase in the number of discouraged and marginally attached workers mean for our economy?

[Teacher Note: Although the specific data in this BLS report is outdated (2008-2009), the explanation of the concepts of marginally attached and discouraged workers is still very appropriate.]